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tv   Inside Story  Al Jazeera America  March 5, 2014 5:00pm-5:31pm EST

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united states. he is charged for killing americans after the september 11th attacks. those are the headlines. if you would like the latest on any of our stories we encourage you to head over to our website at it's inside story is next on al jazeera america. >> if you want to put the economic squeeze on another country during an international dispute, what are the tools of the trade? or lack of trade? ukraine, russia, the u.s. and the european union on this inside story. >> hello, i'm ray suarez. in the bad 'ol days of the
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soviet union the country was known for the shoddiness of its manufactured goods. nobody wanted the second rate autos, appliances, ball point pens, shoes, but now the ussr is stuffed with things the world does want, aluminum, copper, natural gas. columnist tom friedman said president vladimir putin has turned his country into a mafi mafia-run petrol state. putin has made his country steadily relianc reliant on natl resources than human ones. why is that important to you? russian has decided to pick a fight with ukraine and supporters around the world, and how those supporters express their displeasure may effect
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russian economy with risks to its neighbors. >> reporter: global powers to the east and west discuss ways to prevent escalation after the weekend takeover. pro russian troops have taken over and russia said it's not their military. in paris u.s. secretary of state john kerry met with russian foreign ministers sergei lavrov in a session that was intended to be about lebanon. >> the suspending u.s.-russia engagement, and suspending g-8 summit. russia made a choice. we believe it is a wrong choice, the choice to move troops into crimea. >> reporter: on wednesday the european union offered ukraine $15 billion in aid. the same amount russia offered the country before former
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ukrainian president viktor yanukovych ouster. the e.u. plans to meet thursday about the possibility of sanctions but so far the group has treaded lightly. >> crisis diplomacy is not a weakness but it is more important than ever for us not to fall into the abyss of a military escalation not to blunder into this abyss. >> summited osummitvladimir puts unfazed. the u.s. really has little economic leverage. for example, russia and germany have strong economic ties. germany is the biggest importer of russian gas and oil. some of it comes through pop lines across the ukraine. russian supplies account for 36%
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of all german gas consumption. german leader angela merkel has taken on a quiet diplomatic approach through phone conversation in moscow. in washington president obama's options are limited by congress. speaker of the house of representatives republican john boehner spoke with the u.s. stand off against russia against. >> the majority working with our committee chairs on a bailout package also working with them on possible dealing with sanctions that could strengthen the president's hand. >> reporter: the u.s. pledged $1 billion to cash-strapped ukraine tuesday as it's economic situation worsened. >> the state treasury is empty. and to unbelievable and unlimited corruption in my country we cannot collect the revenues in order to execute our social obligations. >> ukraine has issued short-term
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debt at right rates as high as 15%. the new governmentest states had needs $35 billion in rescue loans over the next two years. >> with the first efforts with a diplomatic solution failing in paris today what are the tools at the world's disposal if it decides to pressure russia over the occupation of ukraine? that's this edition of the program. joining us for a look at the russian ukrainian and american economies are jacob, senior fellow at the peterson institute for international economics. from kiev, valari, political analyst at a political think tank. he also lectures at kiev business school and from washington, mihala acting director of the council's energy and environment program.
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jacob, is there much in the way of economic leverage at the u.s. holds in russia? >> cared to the e.u. in my opinion no. you like in europe, for instance, you could move to targeted freezes because a lot of russian least similar to what the former ukraine cocaine leadership had in europe, they had money inside the e.u. and that could be frozen. they don't have as far as i know much money in the u.s. so no, there isn't much. >> how is russia enmeshed in the economy of e.u. and europe more
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broadly? >> indeed, but the point is that the current situation isn't purely economic. when speaking just about the economy, western countries, european countries are interested in keeping close ties to russia in importing russian gas and exporting technology and investing into huge russian potential. but at the moment since last week we have geopolitical military situation and it prevails on economic. that is why european leaders change their minds and their
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statement become more and more strict, and more and more firm against russian invasion into ukraine. >> certainly as valeri suggest there is a military and political dimension to this. but coming back to economics we kept earring over the past couple of days how dependent europe is on russian. >> russian's largest trading partner is europe. and russia is the third largest trading partner for europe. most of the energy russia by itself is the largest supplier of energy beyond just gas to europe. the gas discussion is the elephant in the room pretty much, but we have to remember
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it's far more than that. there is crude exports from russia to europe. so the magnitude of the relationship is enormous and they can't be without each other. >> does that make russia just as reluctant to shut the taps as europe is reluctant to say we don't want-- >> he they're reluctant to lose the $100 million from revenue that comes just from gas exper exports. >> valeri, how is the russian economy been performing lately? i know there has been a lot of talk of how ukraine is in economic trouble. it's not like the russian economy is setting the world on fire, is it?
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>> indeed, the ruling of president viktor yanukovych put ukraine economy in a tough time. we have really shortage of money in our state budget. we have many small businesses have disappeared because of corruption and state pressure. but in general ukrainian economy is healthy, and it could resurrect with wester money with western loans. i think if we speak about plans for ukraine's recovery, there will be an economy with a very good performance. >> so jacob, as valeri suggests, ukraine is clearly vulnerable, but is russia operating from a position of strength? >> most certainly not. i would even go as far to say that part of the reason for this aggressive political action by vladimir putin partly reflects
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the fact that the russian economy isn't growing at 5%, 7% a year any more. he needs to shore up legitimacy in other ways. the reality a the russian economy was scheduled to grow less than 2%. and i wouldn't be surprised if what has already happened tips russia into a recession in 2014. which clearly puts this sort of performance legitimacy of vladimir putin, who has really enjoyed these big rents and terms of trade benefits in his more than a decade in power. well, those days are over. >> and if the world price for refined product or crude product goes down, russian receipts immediately go down, right? they're very sensitive to world prices. >> this is an economy as mentioned in the introduction this is essentially a petrol state. more importantly it's critical
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to recognize that the sort of rents of the russian elites putin himself, and political leadership in the kremlin, these state-owned businesses is personally owned as well. and they're personally affected as well. >> we'll take a break and then talk about what is going on and who is holding the whip in what's going on.
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>> these protestors have decided that today they will be arrested
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>> these people have chased a president from power, they've torn down a state... >> what's clear is that people don't just need protection, they need assistance. >> the economic that led to the political crisis in ukraine and economics are in play right now as the u.s. and the e.u. respond to russia's troop movements in ukraine's crimea peninsula. on this edition of the program we're talking about the deep economic ties between russia and
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europe and how those ties impact american efforts to pressure vladimir putin. mihala, is some of this dependent on the calendar? it's still pretty cold in europe. is this a different confrontation when we get to april or may? >> it's a mild winter. most recent european winters have been harsh, but now you'll see that they have plenty of gas reserves. most have enough gas to make it at the minimum 30 days and even 90 days of con glimpse does that weaken russia's leverage? >> it definitely does as well as the europeans have pursued diversification not just for energy sources but where it's coming from. europe finds itself in a much better situation than it did in. >> you valeri, just recent by the e.u. announced a package of
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emergency aid that pretty much replaces in many ways the aid that was supposed to come from russia. is that enough to get ukraine through the next several months? >> i'm sure that's enough. indeed, we shall include from inside. i think now the so-called stabilization that is being discussed by the government in ukraine to ask for money to stabilize the situation wil and, indeed, we need cuts of budget
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costs because a lot of standings that are much more than the country can spend now, but definitely this aid will be enough and take loans that will stabilize the country. >> russia has been able to squeeze ukraine when it's wanted to. does this aid make it less vulnerable to russian economics? >> without any doubt. you the european union said when it announced the package was to offset the increase of gas prices that they charge ukrainian customers. i think this is in my opinion
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buy and large a bridge gaps loan. this is to win a larger term imf program that could last potentially several years and leads considerably higher amounts of money that could be put into play. >> mihaela, the gas lines. if you look at a map of europe from where the gas run, that's a reality that is hard to get around. it's a productive between years of relationships of sellers and buyers. if europe wants to move away from that heavy dependence, can it do it? >> it definitely can. there are new routes to bring existing gas supplies to europe. russia is proposing one of those, which i doubt will we'll see happen. however, there are new supplies in europe as well as bringing
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l. & g supplies to you were. we have approved l & g experts. when we see thoseship to europe, that will lessen 9 dependency on russian. >> so the balkan fields in the northern west. >> maybe, if the market demands it. >> and valeri, how would you describe the mood right now in kiev? i mean, this wa are they consolg their grip on power? are they acting with more command, solidifying their writ
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in the nation? >> now the government and the parliament control the whole country where we have russian troops. the russian troops have no specific signs of arms people in military uniform without specific signs. president putin said there are no russian troops there, but today many russian people who are members, they told people that they are russians, now
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international investigators from united nations. they know much more than yesterday about specific people who are now without any sign of russian army but soldiers of russian army in crimea. but all other parts of the country are controlled by ukrainian parliament and government, and the country is really unified to to stop invasion and to stop aggression, and very much western diplomats because all western diplomacy together with fortitude and tendency stop. >> we're going to take a break. when we come back we'll talk more about the economic pressure on all the players in this international crisis.
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this is inside story. stay with us.
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>> welcome back to al jazeera america. i'm ray suarez. while the world waits to see what if any economic sanctions are set up, the markets have already reacted. the value of russian assets, the ruble, stocks and bonds plunged this week. russia's central bank had to hike interest rates. we're talking about the high stakes economic game playing out along with diplomacy over the ukraine crisis. jacob it was said in the hours after the markets opened on monday some of the biggest names in russian finance lost billions in their portfolio just because of market plunges. is this the kind of thing that
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puts a less predictable kind of pressure on president putin, that he'll have his own rich guides around his neck saying you're killing me. >> absolutely. the rapidness that financial markets respond to these uncertainties, even though you have european sanctions ratchet up quite gradually, financial markets are going to respond to the threat immediately. if there is a threat, a russian state bank is going to be shut out of the european financial markets, something like that, some point in the future, you're going to sell that stock right away. you're going to want to get out that have stock. that's why you can of much fierce reaction than diplomacy actually works. and this is where this hits the russian elite where it hurts. the majority of russian leaders
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including i would argue vladimir putin himself, they're in it for the money more than anything else. >> mihaela, when you use energy as this kind of blunt instrument, do you also take a risk that your customers look elsewhere so they're not able to be pressured in that way, is this a weapon that you can only use once or twice, and then it doesn't become as useful any more. >> absolutely. when you're thinking about the expression i learned when i was learning english, three strikes you're out, this is the third strike. the security of building more inter connectors within europe, so this would be the third time, and i wonder if the repercussions are going to be harsh on russia. ultimately they don't have a large market yet. >> are there europeans that are not willing to pick this fight
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because they successfully sell goods into the russian economy, which has not been able to provide good, reliable consumer products to its own people. >> there is no doubt that particularly in germany this is a major turn. because the russian market is huge for germany vehicles, they have investment on the ground in russia that will be vulnerable to potential internationalization or counter reactions by the russian authorities to potentially e.u. sanctions. >> and valeri, what about ukraine's own ologarts. there are rich guys who are powerful there and probably don't want this fight either.
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>> indeed, rich guys of ukraine are for unification and stability of the country. they don't want to be just small people in far distance russian province. they would like to be rich guys in independent ukraine. they know here in ukraine not with a totalitarian state, they can be independent and free. they know the story of the very rich guy of russia, you know the story as well, who was released just a few months ago. so what is important is the whole ukrainian nation from poor people in far villages to the most rich people, they have the same opinion towards russian
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invasion, towards civilities and the country. you know probably that two very rich business member of the ukraine. >> valeri, that puts us in mind of an old american saying about people preferring to be big fish in small ponds rather than small fish in big ponds. if you're an ologart in the ukraine you're probably looking at wanting to remain a big shot in that country rather than a remote province. that brings us to the end of
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this edition of inside story. thanks for being with us. in washington, i'm ray suarez.
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